UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): April 23, 2018
VERITEX HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
Texas | 001-36682 | 27-0973566 | ||
(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification Number) | ||
8214 Westchester Drive, Suite 400
Dallas, Texas 75225
(Address of principal executive offices)
(972) 349-6200
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☒ | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒
Item 2.02 Results of Operations and Financial Condition
Item 7.01 Regulation FD Disclosure
On April 23, 2018, Veritex Holdings, Inc. (the “Company”), the holding company for Veritex Community Bank, a Texas state chartered bank, issued a press release describing its results of operations for the first quarter ended March 31, 2018. A copy of the press release (the “Press Release”) is included as Exhibit 99.1 hereto and is incorporated herein by reference.
On Tuesday, April 24, 2018 at 8:30 a.m. Central Time, the Company will host an investor conference call and webcast to review their first quarter 2018 financial results. The webcast will include a slide presentation which consists of information regarding the Company’s operating and growth strategies and financial performance. The presentation materials will be posted on the Company’s website on April 24, 2018. The presentation materials are attached hereto as Exhibit 99.2, which is incorporated herein by reference.
As provided in General Instructions B.2 to Form 8-K, the information furnished in Items 2.02, 7.01, Exhibit 99.1 and Exhibit 99.2 of this Current Report on Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and such information shall not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits. The following is furnished as an exhibit to this Current Report on Form 8-K:
Exhibit Number | Description | |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Veritex Holdings, Inc. | ||
By: | /s/ C. Malcolm Holland, III | |
C. Malcolm Holland, III | ||
Chairman and Chief Executive Officer | ||
Date: April 23, 2018 | ||
Exhibit 99.1
VERITEX HOLDINGS, INC. REPORTS RECORD FIRST QUARTER FINANCIAL RESULTS
STRONG ORGANIC LOAN GROWTH CONTINUES INTO 2018
Dallas, TX — April 23, 2018 —Veritex Holdings, Inc. (“Veritex” or the “Company”) (Nasdaq: VBTX), the holding company for Veritex Community Bank, today announced the results for the quarter ended March 31, 2018. The Company reported net income available to common stockholders of $10.4 million, or $0.42 diluted earnings per share (“EPS”), compared to $3.3 million, or $0.14 diluted EPS, for the quarter ended December 31, 2017 and $3.1 million, or $0.20 diluted EPS, for the quarter ended March 31, 2017.
C. Malcolm Holland, the Company’s Chairman and Chief Executive Officer, said, “I am excited to report record quarterly results. Our earnings reflect significant benefits achieved from the financially attractive acquisitions of Sovereign Bancshares, Inc. and Liberty Bancshares, Inc. completed over the prior two quarters. Integration of these acquisitions have gone well, and we completed the Liberty acquisition’s core system conversion earlier this month. We are currently on track for another good year with strong capital, exceptional credit quality and strong growth in both loans and deposits.”
2018 First Quarter Highlights
• | Net income available for common stockholders for the quarter ended March 31, 2018 was $10.4 million, or $0.42 diluted EPS, compared to $3.1 million, or $0.20 diluted EPS, for the quarter ended March 31, 2017. |
• | Core (non-GAAP) net income available for common stockholders totaled $9.0 million, or $0.37 core diluted EPS, for the quarter ended March 31, 2018, compared to $3.1 million, or $0.20 core diluted EPS, for the quarter ended March 31, 2017. |
• | Total loans, excluding $26.3 million in loans that were sold in connection with the sale of two branch locations discussed below, increased $82.6 million, or 14.8% annualized, to 2.3 billion compared to the quarter ended December 31, 2017. |
• | Total deposits, excluding $64.3 million in deposits that were sold in connection with the sale of two branch locations discussed below, increased $215.2 million, or 37.6% annualized, to $2.5 billion compared to the quarter ended December 31, 2017. |
• | We completed the previously announced sale of certain assets and liabilities associated with two branches in the Austin metropolitan market to Horizon Bank, SSB resulting in a $355 thousand gain on sale reported in other non-interest income. The completion of the sale results in us exiting the Austin metropolitan market. |
Net income for the quarter ended March 31, 2018 was negatively impacted by an $820 thousand re-measurement of our deferred tax assets and deferred tax liabilities due to our new effective tax rate under the Tax Cuts and Jobs Act (the “Tax Act”), compared to a negative impact of $3.1 million for the quarter ended December 31, 2017.
The measurement period for Veritex to determine the fair values of acquired identifiable assets and assumed liabilities is the earlier of (i) twelve months from the date of the acquisition or (ii) as soon as Veritex receives the information it was seeking about facts and circumstances that existed as of the acquisition date or learns that more information is not obtainable. As Veritex had only recorded provisional estimates for the acquisition of Sovereign Bancshares, Inc. (“Sovereign”) and Liberty Bancshares, Inc. (“Liberty”) with respect to loans, bank premises, furniture and equipment, goodwill, intangible assets and deferred taxes for the quarter ended December 31, 2017, changes to these provisional estimates and re-measurement of deferred taxes negatively impacted net income for the quarter ended March 31, 2018. Changes to recorded provisional estimates for the Liberty acquisitions with respect to loans, goodwill, intangible assets, accrued expenses, deposits and deferred taxes could potentially have a further impact on our earnings.
As part of how we measure our results, we use certain non-GAAP financial measures to ascertain performance. These non-GAAP financial measures are reconciled in the section labeled “Reconciliation of Non-GAAP Financial Measures” at the end of this press release.
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Result of Operations for the Three Months Ended March 31, 2018
Net Interest Income
For the three months ended March 31, 2018, net interest income before provision for loan losses was $29.1 million and net interest margin was 4.46% compared to $25.8 million and 4.24%, respectively, for the three months ended December 31, 2017. The $3.3 million increase in net interest income was primarily due to an increase in interest income on loans, which was driven by increased volume in all loan categories resulting from continued organic loan growth and a $1.0 million increase in accretion during the three months ended March 31, 2018 compared to the three months ended December 31, 2017 on loans acquired from Sovereign and Liberty. Net interest margin increased 22 basis points from the three months ended December 31, 2017 primarily due to a change in mix of earning assets resulting from increases in loans, which tend to yield greater interest rates than other interest earning assets. Average loan balances represented 85.4% of average interest-earnings assets for the three months ended March 31, 2018 compared to 84.3% for the three months ended December 31, 2017.
Net interest income before provision for loan losses increased by $17.8 million from $11.3 million to $29.1 million and net interest margin increased 125 basis points from 3.21% to 4.46% for the three months ended March 31, 2018 as compared to the same period in 2017. The increase in net interest income before provision for loan losses was primarily driven by higher loan balances resulting from loans acquired from Sovereign and Liberty and continued organic loan growth. For the three months ended March 31, 2018, average loan balance increased by $1.3 billion compared to the three months ended March 31, 2017, which resulted in a $20.2 million increase in interest income. Net interest margin increased 125 basis points from the three months ended March 31, 2017 primarily due to a change in mix of earning assets resulting from increased loan balances as well as benefits of increases in the prime rates in new and renewed loans. Average loan balances represented 85.4% of average interest-earnings assets for the three months ended March 31, 2018 compared to 70.8% for the three months ended March 31, 2017.
Noninterest Income
Noninterest income for the three months ended March 31, 2018 was $2.8 million, an increase of $483 thousand or 21.0% compared to the three months ended December 31, 2017. The increase was primarily due to a $355 thousand gain on sale of assets resulting from the completion of the sale of certain assets and liabilities associated with two branches in the Austin market. In addition, the increase was due to $339 thousand increase in rental income resulting from the purchase of our headquarter building on December 6, 2017. This increase was partially offset by a $267 thousand gain on the sale of an other real estate owned property during the fourth quarter of 2017 with no corresponding sale in the first quarter of 2018.
Compared to the three months ended March 31, 2017, noninterest income for the three months ended March 31, 2018 grew $1.2 million or 81.2%. The increase was primarily due to a $424 thousand increase in service charges and fees on deposit accounts resulting from the additional acquired Sovereign and Liberty deposit accounts and the associated income from these accounts, $478 thousand of rental income resulting from the purchase of our headquarter building and the $355 thousand gain on sale of assets referenced above resulting from the completion of the sale of the two branches in the Austin market. This increase was partially offset by a $152 thousand decrease in gain on sale of Small Business Administration loans.
Noninterest Expense
Noninterest expense was $17.3 million for the three months ended March 31, 2018, compared to $15.0 million for the three months ended December 31, 2017, an increase of $2.3 million or 15.1%. The increase was primarily driven by a $1.5 million consent fee paid in connection with the execution of an assignment agreement entered into in January 2018 to assign one of our branch leases that the Company ceased using during the three months ended December 31, 2017, which was recorded in occupancy and equipment expense. Compared to the fourth quarter of 2017, salaries and employee benefits increased $573 thousand primarily due to two additional months of salaries and employee benefit expenses for employees associated with the Liberty acquisition that were recognized during the three months ended March 31, 2018, as the Liberty acquisition closed on December 1, 2017. Amortization of intangibles increased $427 thousand primarily due to a $336 thousand increase in amortization of intangible in-place lease assets associated with the purchase of our headquarter building in December 2017.
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Compared to the three months ended March 31, 2017, noninterest expense for the three months ended March 31, 2018 increased $9.9 million, or 132.3%. The increase was primarily driven by a $4.0 million increase in salaries and employee benefits expense related to the additional full-time equivalent employees as a result of the Sovereign and Liberty acquisitions. Additionally, occupancy and equipment expense increased $2.2 million primarily due to the $1.5 million consent fee paid in connection with the lease assignment agreement referenced above. Professional fees increased $1.0 million primarily as a result of increased legal fees associated with closing of the sale of two branches in Austin and the execution of a sublease and a lease assignment agreement during the first quarter of 2018. Amortization of intangibles increased $883 thousand primarily due to a $519 thousand increase in amortization of intangible in-place lease assets associated with the purchase of our headquarter building in December 2017.
Financial Condition
Total loans were $2.3 billion at March 31, 2018, an increase of $56.3 million, or 2.5%, compared to December 31, 2017. Excluding $26.3 million of loans that were sold in connection with the sale of two branch locations in the first quarter of 2018, total loans increased $82.6 million, or 3.7%. The net increase was primarily the result of the continued execution and success of our organic growth strategy.
Total deposits were $2.5 billion at March 31, 2018, an increase of $150.9 million, or 6.4%, compared to the fourth quarter of 2017. Excluding $64.3 million of deposits that were sold in connection with the sale of two branch locations in the first quarter of 2018, total deposits increased $215.2 million, or 9.4%. The increase was primarily due to an increase in financial institution money market accounts of $209.2 million, which includes organic growth in our correspondent money market accounts of $164.3 million. This growth was partially offset by a decrease in non-interest bearing deposits of $54.9 million.
Asset Quality
Our allowance for loan losses as a percentage of loans was 0.58% and 0.57% of total loans at March 31, 2018 and December 31, 2017, respectively. The allowance for loan losses as a percentage of total loans was determined by the qualitative factors around the nature, volume and mix of the loan portfolio. The increase in the allowance for loan loss as a percentage of loans was attributable to continued execution and success of our organic growth strategy. We recorded a provision for loan losses of $678 thousand for the quarter ended March 31, 2018 compared to a provision of $2.5 million for the quarter ended December 31, 2017, due to an increase in our loans as result of organic growth as compared to an increase in acquired loans due to the closing of the Liberty acquisition in December 2017.
Nonperforming assets totaled $3.8 million, or 0.12%, of total assets at March 31, 2018 compared to $932 thousand, or 0.03%, of total assets at December 31, 2017. The increase of $2.9 million in nonperforming assets compared to December 31, 2017 was primarily due to an increase in nonperforming loans of $3.3 million offset by a decrease in other real estate owned of $439 thousand.
Non-GAAP Financial Measures
The Company’s management uses certain non-GAAP (generally accepted accounting principles) financial measures to evaluate its performance. Specifically, the Company reviews and reports core net interest income, core non-interest expense, core net income from operations, core net income, core net income available to common stockholders, core diluted earnings per share, core efficiency ratio, core net interest margin, core return on average assets, tangible book value per common share and the tangible common equity to tangible assets ratio. The Company has included in this release information related to these non-GAAP financial measures for the applicable periods presented. Please refer to “Reconciliation of Non-GAAP Financial Measures” at the end of this release for a reconciliation of these non-GAAP financial measures.
Business Combinations Measurement Period
The measurement period for the Company to determine the fair values of acquired identifiable assets and assumed liabilities for Liberty will end at the earlier of (i) twelve months from the date of the acquisition or (ii) as soon as the Company receives the information it was seeking about facts and circumstances that existed as of the acquisition date or learns that more information is not obtainable. Provisional estimates for loans, goodwill, intangible assets, accrued expenses, deposits and deferred taxes have been recorded for the Liberty acquisition as independent valuations have not been finalized. Changes to provisional estimates could potentially have an impact on the re-measurement of our deferred taxes.
Conference Call
The Company will also host an investor conference call to review the results on Tuesday, April 24, 2018 at 8:30 a.m. Central Time. Participants may pre-register for the call by visiting https://edge.media-server.com/m6/p/wqr6oe3g and will receive a unique pin
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number, which can be used when dialing in for the call. This will allow attendees to enter the call immediately. Alternatively, participants may call toll-free at (877) 703-9880.
The call and corresponding presentation slides will be webcast live on the home page of the Company's website, www.veritexbank.com. An audio replay will be available one hour after the conclusion of the call at (855) 859-2056, Conference #5459708. This replay, as well as the webcast, will be available until May 1, 2018.
About Veritex Holdings, Inc.
Headquartered in Dallas, Texas, Veritex is a bank holding company that conducts banking activities through its wholly-owned subsidiary, Veritex Community Bank, with locations throughout the Dallas-Fort Worth metroplex and in the Houston metropolitan area. Veritex Community Bank is a Texas state chartered bank regulated by the Texas Department of Banking and the Board of Governors of the Federal Reserve System. For more information, visit www.veritexbank.com.
Media Contact:
LaVonda Renfro
972-349-6200
lrenfro@veritexbank.com
Investor Relations:
Susan Caudle
972-349-6132
scaudle@veritexbank.com
This release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include information regarding Veritex’s future financial performance, business and growth strategy, projected plans and objectives, and related transactions, integration of the acquired businesses, ability to recognize anticipated operational efficiencies, and other projections based on macroeconomic and industry trends, which are inherently unreliable due to the multiple factors that impact economic trends, and any such variations may be material. Such forward-looking statements are based on various facts and derived utilizing important assumptions, current expectations, estimates and projections about Veritex and its subsidiaries, any of which may change over time and some of which may be beyond Veritex’s control. Statements preceded by, followed by or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” “plans” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may” and “could” are generally forward-looking in nature and not historical facts, although not all forward-looking statements include the foregoing. Further, certain factors that could affect our future results and cause actual results to differ materially from those expressed in the forward-looking statements include, but are not limited to whether Veritex can: successfully implement its growth strategy, including identifying acquisition targets and consummating suitable acquisitions; continue to sustain internal growth rate; provide competitive products and services that appeal to its customers and target market; difficult market conditions and unfavorable economic trends in the United States generally, and particularly in the market areas in which Veritex operates and in which its loans are concentrated, including the effects of declines in housing markets; an increase in unemployment levels and slowdowns in economic growth; Veritex's level of nonperforming assets and the costs associated with resolving any problem loans including litigation and other costs; changes in market interest rates may increase funding costs and reduce earning asset yields thus reducing margin; the impact of changes in interest rates and the credit quality and strength of underlying collateral and the effect of such changes on the market value of Veritex's investment securities portfolio; the credit risk associated with the substantial amount of commercial real estate, construction and land development, and commercial loans in our loan portfolio; the extensive federal and state regulation, supervision and examination governing almost every aspect of Veritex's operations including changes in regulations affecting financial institutions, including the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations being issued in accordance with this statute and potential expenses associated with complying with such regulations; Veritex's ability to comply with applicable capital and liquidity requirements, including our ability to generate liquidity internally or raise capital on favorable terms, including continued access to the debt and equity capital markets; possible changes in trade, monetary and fiscal policies, laws and regulations and other activities of governments, agencies, and similar organizations; the effects of weather and natural disasters such as floods, droughts, wind, tornadoes and hurricanes as well as effects from geopolitical instability and manmade disasters including terrorist attacks;; and achieve its performance goals. For discussion of these and other
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risks that may cause actual results to differ from expectations, please refer to “Special Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” in Veritex’s Annual Report on Form 10-K filed with the SEC on March 14, 2018 and any updates to those risk factors set forth in Veritex’s subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K. If one or more events related to these or other risks or uncertainties materialize, or if Veritex’s underlying assumptions prove to be incorrect, actual results may differ materially from what Veritex anticipates. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and Veritex does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New risks and uncertainties arise from time to time, and it is not possible for us to predict those events or how they may affect us. In addition, Veritex cannot assess the impact of each factor on Veritex’s business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. All forward-looking statements, expressed or implied, included in this communication are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that Veritex or persons acting on Veritex’s behalf may issue. Annualized, pro forma, projected and estimated numbers are used for illustrative purpose only, are not forecasts and may not reflect actual results.
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VERITEX HOLDINGS, INC. AND SUBSIDIARY
Consolidated Financial Highlights - (Unaudited)
(In thousands, except percentages)
At and For the Three Months Ended | ||||||||||||||||||||
March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | ||||||||||||||||
Selected Financial Data: | ||||||||||||||||||||
Net income | $ | 10,388 | $ | 3,257 | $ | 5,182 | $ | 3,615 | $ | 3,098 | ||||||||||
Net income available to common stockholders | 10,388 | 3,257 | 5,140 | 3,615 | 3,098 | |||||||||||||||
Total assets | 3,063,319 | 2,945,583 | 2,494,861 | 1,508,589 | 1,522,015 | |||||||||||||||
Total loans(1) | 2,316,089 | 2,259,831 | 1,907,509 | 1,122,468 | 1,020,970 | |||||||||||||||
Provision for loan losses | 678 | 2,529 | 752 | 943 | 890 | |||||||||||||||
Allowance for loan losses | 13,401 | 12,808 | 10,492 | 9,740 | 8,816 | |||||||||||||||
Noninterest-bearing deposits(2) | 597,236 | 652,218 | 495,627 | 337,057 | 338,226 | |||||||||||||||
Total deposits(2) | 2,493,794 | 2,342,912 | 1,985,658 | 1,211,107 | 1,221,696 | |||||||||||||||
Total stockholders’ equity | 497,433 | 488,929 | 445,929 | 247,602 | 242,725 | |||||||||||||||
Summary Performance Ratios: | ||||||||||||||||||||
Return on average assets(3) | 1.41 | % | 0.48 | % | 0.94 | % | 0.97 | % | 0.83 | % | ||||||||||
Return on average equity(3) | 8.55 | 2.78 | 5.44 | 5.89 | 5.20 | |||||||||||||||
Net interest margin(4) | 4.46 | 4.24 | 3.78 | 3.53 | 3.21 | |||||||||||||||
Efficiency ratio(5) | 54.28 | 53.60 | 59.33 | 55.03 | 58.26 | |||||||||||||||
Noninterest expense to average assets(3) | 2.35 | 2.22 | 2.26 | 2.08 | 1.99 | |||||||||||||||
Summary Credit Quality Data: | ||||||||||||||||||||
Nonaccrual loans | $ | 3,438 | $ | 465 | $ | 1,856 | $ | 1,514 | $ | 1,686 | ||||||||||
Accruing loans 90 or more days past due(6) | 374 | 18 | 54 | 15 | 212 | |||||||||||||||
Other real estate owned | 10 | 449 | 738 | 493 | 998 | |||||||||||||||
Nonperforming assets to total assets | 0.12 | % | 0.03 | % | 0.11 | % | 0.13 | % | 0.19 | % | ||||||||||
Nonperforming loans to total loans | 0.16 | 0.02 | 0.10 | 0.14 | 0.19 | |||||||||||||||
Allowance for loan losses to total loans | 0.58 | 0.57 | 0.55 | 0.87 | 0.86 | |||||||||||||||
Net charge-offs to average loans outstanding | — | 0.01 | — | — | 0.06 | |||||||||||||||
Capital Ratios: | ||||||||||||||||||||
Total stockholders’ equity to total assets | 16.24 | % | 16.60 | % | 17.87 | % | 16.41 | % | 15.95 | % | ||||||||||
Tangible common equity to tangible assets | 11.01 | 11.12 | 12.76 | 14.77 | 14.31 | |||||||||||||||
Tier 1 capital to average assets | 11.84 | 12.92 | 15.26 | 15.09 | 14.65 | |||||||||||||||
Tier 1 capital to risk-weighted assets | 12.53 | 12.48 | 14.17 | 18.17 | 19.94 | |||||||||||||||
Common equity tier 1 (to risk weighted assets) | 12.09 | 12.03 | 13.65 | 17.92 | 19.66 | |||||||||||||||
Total capital to risk-weighted assets | 13.22 | 13.16 | 14.87 | 19.37 | 21.20 | |||||||||||||||
___________________________
(1) | Total loans does not include loans held for sale and deferred fees. Loans held for sale were $893 thousand at March 31, 2018, $841 thousand at December 31, 2017, $2.2 million at September 30, 2017, $4.1 million at June 30, 2017 and $1.9 million at March 31, 2017. Deferred fees were $24 thousand at March 31, 2018, $28 thousand at December 31, 2017, $28 thousand at September 30, 2017, $40 thousand at June 30, 2017, and $48 thousand at March 31, 2017. Total loans include branch assets held for sale of $26.3 million at December 31, 2017. |
(2) | Total noninterest-bearing deposits and total deposits at December 31, 2017 include branch liabilities held for sale of $39.4 million and $64.3 million, respectively. |
(3) | We calculate our average assets and average equity for a period by dividing the sum of our total assets or total stockholders’ equity, as the case may be, at the close of business on each day in the relevant period, by the number of days in the period. We have calculated our return on average assets and return on average equity for a period by dividing net income for that period by our average assets and average equity, as the case may be, for that period. |
(4) | Net interest margin represents net interest income, annualized on a fully tax equivalent basis, divided by average interest-earning assets. |
(5) | Efficiency ratio represents noninterest expense divided by the sum of net interest income and noninterest income. |
(6) | Accruing loans 90 or more days past due excludes $2.0 million, $3.3 million and $3.3 million of PCI loans as of March 31, 2018, December 31, 2017 and September 30, 2017. No PCI loans were considered non-performing loans as of March 31, 2018, December 31, 2017 and September 30, 2017. |
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VERITEX HOLDINGS, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets - (Unaudited)
(In thousands)
March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | ||||||||||||||||
ASSETS | ||||||||||||||||||||
Cash and due from banks | $ | 26,861 | $ | 38,243 | $ | 21,879 | $ | 28,687 | $ | 23,021 | ||||||||||
Interest bearing deposits in other banks | 168,333 | 110,801 | 129,497 | 144,459 | 262,714 | |||||||||||||||
Total cash and cash equivalents | 195,194 | 149,044 | 151,376 | 173,146 | 285,735 | |||||||||||||||
Investment securities | 243,164 | 228,117 | 204,788 | 134,708 | 138,698 | |||||||||||||||
Loans held for sale | 893 | 841 | 2,179 | 4,118 | 1,925 | |||||||||||||||
Loans, net | 2,302,664 | 2,220,682 | 1,896,989 | 1,112,688 | 1,012,106 | |||||||||||||||
Accrued interest receivable | 7,127 | 7,676 | 6,387 | 3,333 | 2,845 | |||||||||||||||
Bank-owned life insurance | 21,620 | 21,476 | 20,517 | 20,369 | 20,224 | |||||||||||||||
Bank premises, furniture and equipment, net | 76,045 | 75,251 | 40,129 | 17,978 | 17,521 | |||||||||||||||
Non-marketable equity securities | 20,806 | 13,732 | 10,283 | 7,407 | 7,375 | |||||||||||||||
Investment in unconsolidated subsidiary | 352 | 352 | 352 | 93 | 93 | |||||||||||||||
Other real estate owned | 10 | 449 | 738 | 493 | 998 | |||||||||||||||
Intangible assets, net | 18,372 | 20,441 | 10,531 | 2,171 | 2,161 | |||||||||||||||
Goodwill | 161,685 | 159,452 | 135,832 | 26,865 | 26,865 | |||||||||||||||
Other assets | 13,634 | 14,518 | 14,760 | 5,220 | 5,469 | |||||||||||||||
Branch assets held for sale | 1,753 | 33,552 | — | — | — | |||||||||||||||
Total assets | $ | 3,063,319 | $ | 2,945,583 | $ | 2,494,861 | $ | 1,508,589 | $ | 1,522,015 | ||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||||
Deposits: | ||||||||||||||||||||
Noninterest-bearing | $ | 597,236 | $ | 612,830 | $ | 495,627 | $ | 337,057 | $ | 338,226 | ||||||||||
Interest-bearing | 1,896,558 | 1,665,800 | 1,490,031 | 874,050 | 883,470 | |||||||||||||||
Total deposits | 2,493,794 | 2,278,630 | 1,985,658 | 1,211,107 | 1,221,696 | |||||||||||||||
Accounts payable and accrued expenses | 3,862 | 5,098 | 4,017 | 2,574 | 1,631 | |||||||||||||||
Accrued interest payable and other liabilities | 3,412 | 5,446 | 4,368 | 1,032 | 9,655 | |||||||||||||||
Advances from Federal Home Loan Bank | 48,128 | 71,164 | 38,200 | 38,235 | 38,271 | |||||||||||||||
Junior subordinated debentures | 11,702 | 11,702 | 11,702 | 3,093 | 3,093 | |||||||||||||||
Subordinated notes | 4,988 | 4,987 | 4,987 | 4,946 | 4,944 | |||||||||||||||
Other borrowings | — | 15,000 | — | — | — | |||||||||||||||
Branch liabilities held for sale | — | 64,627 | — | — | — | |||||||||||||||
Total liabilities | 2,565,886 | 2,456,654 | 2,048,932 | 1,260,987 | 1,279,290 | |||||||||||||||
Commitments and contingencies | ||||||||||||||||||||
Stockholders’ equity: | ||||||||||||||||||||
Common stock | 241 | 241 | 227 | 152 | 152 | |||||||||||||||
Additional paid-in capital | 445,964 | 445,517 | 404,900 | 211,901 | 211,512 | |||||||||||||||
Retained earnings | 55,015 | 44,627 | 41,143 | 36,003 | 32,388 | |||||||||||||||
Unallocated Employee Stock Ownership Plan shares | (106 | ) | (106 | ) | (209 | ) | (209 | ) | (209 | ) | ||||||||||
Accumulated other comprehensive loss | (3,611 | ) | (1,280 | ) | (62 | ) | (175 | ) | (1,048 | ) | ||||||||||
Treasury stock | (70 | ) | (70 | ) | (70 | ) | (70 | ) | (70 | ) | ||||||||||
Total stockholders’ equity | 497,433 | 488,929 | 445,929 | 247,602 | 242,725 | |||||||||||||||
Total liabilities and stockholders’ equity | $ | 3,063,319 | $ | 2,945,583 | $ | 2,494,861 | $ | 1,508,589 | $ | 1,522,015 | ||||||||||
7
VERITEX HOLDINGS, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Income - (Unaudited)
(In thousands, except per share data)
For the Three Months Ended | ||||||||||||||||||||
March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | ||||||||||||||||
Interest income: | ||||||||||||||||||||
Interest and fees on loans | $ | 32,067 | $ | 28,182 | $ | 20,706 | $ | 13,024 | $ | 11,883 | ||||||||||
Interest on investment securities | 1,328 | 1,211 | 941 | 735 | 575 | |||||||||||||||
Interest on deposits in other banks | 687 | 500 | 629 | 548 | 610 | |||||||||||||||
Interest on other | 5 | 4 | 3 | — | 1 | |||||||||||||||
Total interest income | 34,087 | 29,897 | 22,279 | 14,307 | 13,069 | |||||||||||||||
Interest expense: | ||||||||||||||||||||
Interest on deposit accounts | 4,293 | 3,677 | 2,812 | 1,742 | 1,647 | |||||||||||||||
Interest on borrowings | 692 | 470 | 338 | 189 | 169 | |||||||||||||||
Total interest expense | 4,985 | 4,147 | 3,150 | 1,931 | 1,816 | |||||||||||||||
Net interest income | 29,102 | 25,750 | 19,129 | 12,376 | 11,253 | |||||||||||||||
Provision for loan losses | 678 | 2,529 | 752 | 943 | 890 | |||||||||||||||
Net interest income after provision for loan losses | 28,424 | 23,221 | 18,377 | 11,433 | 10,363 | |||||||||||||||
Noninterest income: | ||||||||||||||||||||
Service charges and fees on deposit accounts | 933 | 769 | 669 | 555 | 509 | |||||||||||||||
Gain on sales of investment securities | 8 | 17 | 205 | — | — | |||||||||||||||
Gain on sales of loans and other assets owned | 581 | 882 | 705 | 807 | 747 | |||||||||||||||
Bank-owned life insurance | 189 | 192 | 188 | 186 | 187 | |||||||||||||||
Other | 1,070 | 438 | 210 | 218 | 92 | |||||||||||||||
Total noninterest income | 2,781 | 2,298 | 1,977 | 1,766 | 1,535 | |||||||||||||||
Noninterest expense: | ||||||||||||||||||||
Salaries and employee benefits | 7,930 | 7,357 | 5,921 | 3,642 | 3,908 | |||||||||||||||
Occupancy and equipment | 3,234 | 1,996 | 1,596 | 1,015 | 1,011 | |||||||||||||||
Professional fees | 1,802 | 1,713 | 1,973 | 1,188 | 798 | |||||||||||||||
Data processing and software expense | 828 | 766 | 719 | 372 | 360 | |||||||||||||||
FDIC assessment fees | 302 | 116 | 410 | 393 | 258 | |||||||||||||||
Marketing | 461 | 388 | 436 | 225 | 244 | |||||||||||||||
Other assets owned expenses and write-downs | 172 | 73 | 71 | 13 | 25 | |||||||||||||||
Amortization of intangibles | 978 | 551 | 223 | 95 | 95 | |||||||||||||||
Telephone and communications | 426 | 282 | 230 | 106 | 102 | |||||||||||||||
Other | 1,173 | 1,793 | 943 | 733 | 649 | |||||||||||||||
Total noninterest expense | 17,306 | 15,035 | 12,522 | 7,782 | 7,450 | |||||||||||||||
Net income from operations | 13,899 | 10,484 | 7,832 | 5,417 | 4,448 | |||||||||||||||
Income tax expense | 3,511 | 7,227 | 2,650 | 1,802 | 1,350 | |||||||||||||||
Net income | $ | 10,388 | $ | 3,257 | $ | 5,182 | $ | 3,615 | $ | 3,098 | ||||||||||
Preferred stock dividends | $ | — | $ | — | $ | 42 | $ | — | $ | — | ||||||||||
Net income available to common stockholders | $ | 10,388 | $ | 3,257 | $ | 5,140 | $ | 3,615 | $ | 3,098 | ||||||||||
Basic earnings per share | $ | 0.43 | $ | 0.14 | $ | 0.26 | $ | 0.24 | $ | 0.20 | ||||||||||
Diluted earnings per share | $ | 0.42 | $ | 0.14 | $ | 0.25 | $ | 0.23 | $ | 0.20 | ||||||||||
Weighted average basic shares outstanding | 24,120 | 23,124 | 19,976 | 15,211 | 15,200 | |||||||||||||||
Weighted average diluted shares outstanding | 24,539 | 23,524 | 20,392 | 15,637 | 15,632 | |||||||||||||||
8
VERITEX HOLDINGS, INC. AND SUBSIDIARY
Reconciliation of Non-GAAP Financial Measures - (Unaudited)
(In thousands except per share data and percentages)
The following table reconciles, at the dates set forth below, GAAP net income available to common stockholders to core (non-GAAP) net income available to common stockholders, core basic and diluted earnings per share, core efficiency ratio, core net interest margin and core return on average assets:
For the Three Months Ended | |||||||||||||||||||||
March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | |||||||||||||||||
Net interest income (as reported) | $ | 29,102 | $ | 25,750 | $ | 19,129 | $ | 12,376 | $ | 11,253 | |||||||||||
Adjustment: | |||||||||||||||||||||
Income recognized on acquired loans | 4,009 | $ | 2,955 | $ | 637 | $ | 135 | $ | 55 | ||||||||||||
Core net interest income | 25,093 | 22,795 | 18,492 | 12,241 | 11,198 | ||||||||||||||||
Provision for loan losses (as reported) | 678 | 2,529 | 752 | 943 | 890 | ||||||||||||||||
Noninterest income (as reported) | 2,781 | 2,298 | 1,977 | 1,766 | 1,535 | ||||||||||||||||
Adjustment: | |||||||||||||||||||||
Gain on sale of disposed branch assets | 388 | — | — | — | — | ||||||||||||||||
Core noninterest income | 2,393 | 2,298 | 1,977 | 1,766 | 1,535 | ||||||||||||||||
Noninterest expense (as reported) | 17,306 | 15,035 | 12,522 | 7,782 | 7,450 | ||||||||||||||||
Adjustment: | |||||||||||||||||||||
Lease exit costs, net(1) | (1,071 | ) | — | — | — | — | |||||||||||||||
Branch closure expenses | (172 | ) | — | — | — | — | |||||||||||||||
M&A and other related one-time expenses | (335 | ) | (1,018 | ) | (1,391 | ) | (193 | ) | (89 | ) | |||||||||||
Core noninterest expense | 15,728 | 14,017 | 11,131 | 7,589 | 7,361 | ||||||||||||||||
Core net income from operations | 11,080 | 8,547 | 8,586 | 5,475 | 4,482 | ||||||||||||||||
Income tax expense (as reported) | 3,511 | 7,227 | 2,650 | 1,802 | 1,350 | ||||||||||||||||
Adjustments: | |||||||||||||||||||||
Tax impact of adjustments | (579 | ) | (678 | ) | 264 | 20 | 12 | ||||||||||||||
Tax Act re-measurement | (820 | ) | (3,051 | ) | — | — | — | ||||||||||||||
Other M&A discrete tax items | — | (398 | ) | — | — | — | |||||||||||||||
Core income tax expense | $ | 2,112 | $ | 3,100 | $ | 2,914 | $ | 1,822 | $ | 1,362 | |||||||||||
Net income (as reported) | $ | 10,388 | $ | 3,257 | $ | 5,182 | $ | 3,615 | $ | 3,098 | |||||||||||
Core net income | $ | 8,968 | $ | 5,447 | $ | 5,672 | $ | 3,653 | $ | 3,120 | |||||||||||
Preferred stock dividends (as reported) | $ | — | $ | — | — | $ | 42 | $ | — | $ | — | ||||||||||
Core net income available to common stockholders | $ | 8,968 | $ | 5,447 | $ | 5,630 | $ | 3,653 | $ | 3,120 | |||||||||||
Weighted average diluted shares outstanding | 24,539 | 23,524 | 20,392 | 15,637 | 15,632 | ||||||||||||||||
Diluted earnings per share (as reported) | 0.42 | 0.14 | 0.25 | 0.23 | 0.20 | ||||||||||||||||
Core diluted earnings per share(2) | 0.37 | 0.23 | 0.28 | 0.23 | 0.20 | ||||||||||||||||
Efficiency Ratio | |||||||||||||||||||||
Efficiency ratio (as reported) | 54.28 | % | 53.60 | % | 59.33 | % | 55.03 | % | 58.26 | % | |||||||||||
Core efficiency ratio(3) | 57.22 | % | 55.86 | % | 54.38 | % | 54.18 | % | 57.81 | % | |||||||||||
Net Interest Margin | |||||||||||||||||||||
Net interest margin (as reported) | 4.46 | % | 4.24 | % | 3.78 | % | 3.53 | % | 3.21 | % | |||||||||||
Core net interest margin(4) | 3.84 | % | 3.75 | % | 3.66 | % | 3.49 | % | 3.19 | % | |||||||||||
Return on average assets | |||||||||||||||||||||
Return on average assets (as reported) | 1.41 | % | 0.48 | % | 0.94 | % | 0.97 | % | 0.83 | % | |||||||||||
Core return on average assets(5) | 1.22 | % | 0.80 | % | 1.02 | % | 0.98 | % | 0.83 | % | |||||||||||
(1) | Lease exit costs, net includes a $1.5 million consent fee and $240 thousand in professional services paid in January 2018 to separately assign and sublease two of our branch leases that the Company ceased using in 2017 offset by the reversal of the corresponding assigned lease cease-use liability totaling $669 thousand. |
(2) | Core diluted earnings per share is defined as core net income available to common stockholders divided by weighted average diluted shares outstanding. Excluded from net income available to common stockholders are income recognized on acquired loans, lease exit costs, net, branch closure expenses, M&A and other related one-time expenses, the tax impact of the adjustments to core net interest income and core noninterest expense, the re-measurement of our deferred tax asset as a result of the Tax Act and the tax impact of other M&A discrete tax items. |
(3) | We calculate core efficiency ratio as core noninterest expense divided by the sum of core net interest income and core noninterest income. |
(4) | Core net interest margin is equal to core net interest income divided by average interest-earning assets. |
(5) | Core return on average assets is equal to core net income divided by average assets |
9
VERITEX HOLDINGS, INC. AND SUBSIDIARY
Reconciliation of Non-GAAP Financial Measures - (Unaudited)
(In thousands except per share data and percentages)
The following table reconciles, at the dates set forth below, total stockholders’ equity to tangible common equity and total assets to tangible assets and presents our book value per common share to our tangible book value per share:
For the Three Months Ended | ||||||||||||||||||||
March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | ||||||||||||||||
Tangible Common Equity | ||||||||||||||||||||
Total stockholders’ equity | $ | 497,433 | $ | 488,929 | $ | 445,929 | $ | 247,602 | $ | 242,725 | ||||||||||
Adjustments: | ||||||||||||||||||||
Goodwill | (161,685 | ) | (159,452 | ) | (135,832 | ) | (26,865 | ) | (26,865 | ) | ||||||||||
Intangible assets(1) | (18,372 | ) | (22,165 | ) | (10,531 | ) | (2,171 | ) | (2,161 | ) | ||||||||||
Total tangible common equity | $ | 317,376 | $ | 307,312 | $ | 299,566 | $ | 218,566 | $ | 213,699 | ||||||||||
Tangible Assets | ||||||||||||||||||||
Total assets | $ | 3,063,319 | $ | 2,945,583 | $ | 2,494,861 | $ | 1,508,589 | $ | 1,522,015 | ||||||||||
Adjustments: | ||||||||||||||||||||
Goodwill | (161,685 | ) | (159,452 | ) | (135,832 | ) | (26,865 | ) | (26,865 | ) | ||||||||||
Intangible assets(1) | (18,372 | ) | (22,165 | ) | (10,531 | ) | (2,171 | ) | (2,161 | ) | ||||||||||
Total tangible assets | $ | 2,883,262 | $ | 2,763,966 | $ | 2,348,498 | $ | 1,479,553 | $ | 1,492,989 | ||||||||||
Tangible Common Equity to Tangible Assets(2) | 11.01 | % | 11.12 | % | 12.76 | % | 14.77 | % | 14.31 | % | ||||||||||
Common shares outstanding | 24,149 | 24,110 | 22,644 | 15,233 | 15,229 | |||||||||||||||
Book value per common share(3) | $ | 20.60 | $ | 20.28 | $ | 19.69 | $ | 16.25 | $ | 15.94 | ||||||||||
Tangible book value per common share(4) | $ | 13.14 | $ | 12.75 | $ | 13.23 | $ | 14.35 | $ | 14.03 | ||||||||||
(1) | Intangible assets as of December 31, 2017 include branch intangible assets held for sale of $1.7 million. |
(2) | We calculate tangible common equity as total stockholders’ equity less goodwill and other intangible assets, net of accumulated amortization, and we calculate tangible assets as total assets less goodwill and other intangible assets, net of accumulated amortization. |
(3) | We calculate book value per common share as total stockholders’ equity at the end of the relevant period divided by the outstanding number of shares of our common stock at the end of the relevant period. |
(4) | We calculate tangible book value per common share as total tangible common equity, divided by the outstanding number of shares of our common stock at the end of the relevant period. |
10
VERITEX HOLDINGS, INC. AND SUBSIDIARY
Net Interest Margin - (Unaudited)
(In thousands except percentages)
For the Three Months Ended | |||||||||||||||||||||||||||||||||
March 31, 2018 | December 31, 2017 | March 31, 2017 | |||||||||||||||||||||||||||||||
Average Outstanding Balance | Interest Earned/ Interest Paid | Average Yield/ Rate | Average Outstanding Balance | Interest Earned/ Interest Paid | Average Yield/ Rate | Average Outstanding Balance | Interest Earned/ Interest Paid | Average Yield/ Rate | |||||||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||||||
Interest-earning assets: | |||||||||||||||||||||||||||||||||
Total loans(1)(4) | $ | 2,261,133 | $ | 32,067 | 5.75 | % | $ | 2,030,587 | $ | 28,182 | 5.51 | % | $ | 1,007,622 | $ | 11,883 | 4.78 | % | |||||||||||||||
Securities available for sale | 222,026 | 1,328 | 2.43 | 233,244 | 1,211 | 2.06 | 119,226 | 575 | 1.96 | ||||||||||||||||||||||||
Interest-bearing deposits in other banks | 163,996 | 687 | 1.70 | 145,099 | 500 | 1.37 | 295,637 | 610 | 0.84 | ||||||||||||||||||||||||
Investment in unconsolidated subsidiary | 327 | 5 | 6.20 | 352 | 4 | 4.51 | 93 | 1 | 4.36 | ||||||||||||||||||||||||
Total interest-earning assets | 2,647,482 | 34,087 | 5.22 | 2,409,282 | 29,897 | 4.92 | 1,422,578 | 13,069 | 3.73 | ||||||||||||||||||||||||
Allowance for loan losses | (13,133 | ) | (10,658 | ) | (8,558 | ) | |||||||||||||||||||||||||||
Noninterest-earning assets(4) | 355,625 | 292,664 | 103,692 | ||||||||||||||||||||||||||||||
Total assets | $ | 2,989,974 | $ | 2,691,288 | $ | 1,517,712 | |||||||||||||||||||||||||||
Liabilities and Stockholders’ Equity | |||||||||||||||||||||||||||||||||
Interest-bearing liabilities: | |||||||||||||||||||||||||||||||||
Interest-bearing deposits(4) | $ | 1,745,195 | $ | 4,293 | 1.00 | % | $ | 1,569,950 | $ | 3,677 | 0.93 | % | $ | 858,420 | $ | 1,647 | 0.78 | % | |||||||||||||||
Advances from FHLB | 117,507 | 460 | 1.59 | 74,589 | 213 | 1.13 | 38,293 | 70 | 0.74 | ||||||||||||||||||||||||
Other borrowings | 16,926 | 232 | 5.56 | 25,398 | 257 | 4.01 | 8,064 | 99 | 4.98 | ||||||||||||||||||||||||
Total interest-bearing liabilities | 1,879,628 | 4,985 | 1.08 | 1,669,937 | 4,147 | 0.98 | 904,777 | 1,816 | 0.81 | ||||||||||||||||||||||||
Noninterest-bearing liabilities: | |||||||||||||||||||||||||||||||||
Noninterest-bearing deposits(4) | 600,215 | 542,918 | 368,117 | ||||||||||||||||||||||||||||||
Other liabilities(4) | 17,262 | 13,819 | 3,209 | ||||||||||||||||||||||||||||||
Total noninterest-bearing liabilities | 617,477 | 556,737 | 371,326 | ||||||||||||||||||||||||||||||
Stockholders’ equity | 492,869 | 464,614 | 241,609 | ||||||||||||||||||||||||||||||
Total liabilities and stockholders’ equity | $ | 2,989,974 | $ | 2,691,288 | $ | 1,517,712 | |||||||||||||||||||||||||||
Net interest rate spread(2) | 4.14 | % | 3.94 | % | 2.92 | % | |||||||||||||||||||||||||||
Net interest income | $ | 29,102 | $ | 25,750 | $ | 11,253 | |||||||||||||||||||||||||||
Net interest margin(3) | 4.46 | % | 4.24 | % | 3.21 | % | |||||||||||||||||||||||||||
(1) | Includes average outstanding balances of loans held for sale of $1,336, $3,155 and $2,094 for the three months ended March 31, 2018, December 31, 2017, and March 31, 2017, respectively. |
(2) | Net interest rate spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities. |
(3) | Net interest margin is equal to net interest income divided by average interest-earning assets. |
(4) | Includes average outstanding balances of branch assets and liabilities held for sale in total loans, noninterest-bearing assets, interest-bearing deposits, noninterest-bearing deposits and other liabilities for the three months ended December 31, 2017. |
11
V E R I T E X
Earnings Presentation
First Quarter 2018
April 24, 2018
2
Safe Harbor Statement
NO OFFER OR SOLICITATION
This communication does not constitute an offer to sell, a solicitation of an offer to sell, the solicitation or an offer to buy any securities or a solicitation of any vote or approval. There will be no sale of securities in any
jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be made except by means of a
prospectus meeting the requirement of Section 10 of the Securities Act of 1933, as amended.
NON-GAAP FINANCIAL MEASURES
Veritex reports its results in accordance with United States generally accepted accounting principles (“GAAP”). However, management believes that certain non-GAAP financial measures used in managing its business
may provide meaningful information to investors about underlying trends in its business. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, Veritex’s reported results
prepared in accordance with and management uses these non-GAAP measures to measure the Company’s performance and believes that these non-GAAP measures provide a greater understanding of ongoing
operations, enhance comparability of results of operations with prior periods and show the effects of significant gains and charges in the periods presented without the impact of unusual items or events that may
obscure trends in the Company’s underlying performance. These disclosures should not be viewed as a substitute for financial measures determined in accordance with GAAP. The following are the non-GAAP
measures used in this presentation:
• core net interest income adjusts net interest income as determined in accordance with GAAP to exclude income recognized on acquired loans
• core noninterest expense adjusts noninterest expense as determined in accordance with GAAP to exclude merger and acquisition costs
• core income tax expense adjusts income tax expense as determined in accordance with GAAP to exclude the tax impact of the adjustments to core net interest income and core noninterest expense, the re-
measurement of our deferred tax asset as a result of the Tax Act and the tax impact of other M&A discrete items
• core net income adjusts net income as determined in accordance with GAAP to exclude the impact of income recognized on acquired loans, merger and acquisition costs and the tax impact of the adjustments to
core net interest income and core noninterest expense, exclude the re-measurement of our deferred tax asset as a result of the Tax Act and exclude the tax impact of other M&A discrete items
• Core diluted earnings per share (EPS) divides (i) core net income by (ii) weighted average diluted shares of common stock outstanding for the applicable period
• Core efficiency ratio is determined by dividing core noninterest expense by the sum of core net interest income and noninterest income
• Core return on average assets is determined by dividing core net income by average assets
• Tangible common equity is defined as total stockholders’ equity less goodwill and other intangible assets
• Tangible assets is defined as total assets less goodwill and other intangible assets
• Tangible common equity to tangible assets is a ratio that is determined by dividing tangible common equity by tangible assets
• Tangible book value per common share is determined by dividing tangible common equity by common shares outstanding
Please see Reconciliation of Non-GAAP Financial Measures at the end of this presentation for a reconciliation to the nearest GAAP financial measure.
FORWARD LOOKING STATEMENTS
This presentation contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include information regarding the Company’s
future financial performance, business and growth strategy, projected plans and objectives, and related transactions, integration of the acquired businesses, ability to recognize anticipated operational efficiencies,
and other projections based on macroeconomic and industry trends, which are inherently unreliable due to the multiple factors that impact economic trends, and any such variations may be material. Such forward-
looking statements are based on various facts and derived utilizing important assumptions, current expectations, estimates and projections about the Company and its subsidiaries, any of which may change over time
and some of which may be beyond the Company’s control. Statements preceded by, followed by or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” “plans”
and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may” and “could” are generally forward-looking in nature and not historical facts, although not all forward-looking statements
include the foregoing. Further, certain factors that could affect our future results and cause actual results to differ materially from those expressed in the forward-looking statements include, but are not limited to
whether the Company can: successfully implement its growth strategy, including identifying acquisition targets and consummating suitable acquisitions; continue to sustain internal growth rate; provide competitive
products and services that appeal to its customers and target market; difficult market conditions and unfavorable economic trends in the United States generally, and particularly in the market areas in which the
Company operates and in which its loans are concentrated, including the effects of declines in housing markets; an increase in unemployment levels and slowdowns in economic growth; the Company's level of
nonperforming assets and the costs associated with resolving any problem loans including litigation and other costs; changes in market interest rates may increase funding costs and reduce earning asset yields thus
reducing margin; the impact of changes in interest rates and the credit quality and strength of underlying collateral and the effect of such changes on the market value of the Company's investment securities
portfolio; the credit risk associated with the substantial amount of commercial real estate, construction and land development, and commercial loans in our loan portfolio; the extensive federal and state regulation,
supervision and examination governing almost every aspect of the Company's operations including changes in regulations affecting financial institutions, including the Dodd-Frank Wall Street Reform and Consumer
Protection Act and the rules and regulations being issued in accordance with this statute and potential expenses associated with complying with such regulations; the Company's ability to comply with applicable
capital and liquidity requirements, including our ability to generate liquidity internally or raise capital on favorable terms, including continued access to the debt and equity capital markets; possible changes in trade,
monetary and fiscal policies, laws and regulations and other activities of governments, agencies, and similar organizations; and, the effects of weather and natural disasters such as floods, droughts, wind, tornadoes
and hurricanes as well as effects from geopolitical instability and manmade disasters including terrorist attacks; and achieve its performance goals. For discussion of these and other risks that may cause actual results
to differ from expectations, please refer to “Special Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” in Veritex’s Annual Report on Form 10-K filed with the SEC on March 14, 2018 and any
updates to those risk factors set forth in Veritex’s subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K. If one or more events related to these or other risks or uncertainties materialize, or if
Veritex’s underlying assumptions prove to be incorrect, actual results may differ materially from what Veritex anticipates. Accordingly, you should not place undue reliance on any such forward-looking statements.
Any forward-looking statement speaks only as of the date on which it is made, and Veritex does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new
information, future developments or otherwise. New risks and uncertainties arise from time to time, and it is not possible for us to predict those events or how they may affect us. In addition, Veritex cannot assess
the impact of each factor on Veritex’s business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. All
forward-looking statements, expressed or implied, included in this communication are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in
connection with any subsequent written or oral forward-looking statements that Veritex or persons acting on Veritex’s behalf may issue. Annualized, pro forma, projected and estimated numbers are used for
illustrative purpose only, are not forecasts and may not reflect actual results.
Return on equity, return on assets and EPS results both on “as
reported” and core operating result basis represent record highs for
the Company
Continue to deploy excess capital into earning assets
CAPITAL STEWARDSHIP
3
Kicked-off operational efficiency projects in our loan operations,
accounts payable and human resource departments
Sublet a redundant branch in our Dallas market and completed the
sale of two non-core branch locations in Austin
OPERATIONAL
EXCELLENCE
First quarter 2018 organic loan growth was $82.6 million(1) or 14.8%
annualized compared to prior quarter
Record new loan commitments for the quarter of $357.7 million
STRATEGIC GROWTH
Focused efforts on executing a seamless integration of the Liberty
Bancshares, Inc. acquisition
Made good on our commitment to increase employee stock
ownership through distributions of shares and increased ESOP match
CULTURE
First Quarter 2018 Accomplishments
(1) Organic loan growth excludes $26.3 million of loans from the December 31, 2017 total loan balances that were sold in connection with the sale of two non-core branch locations in
Austin during the first quarter of 2018.
First Quarter 2018 Financial Highlights
(1) As used in this presentation, core net interest margin, core noninterest expense, core net income available to common, core diluted EPS, core efficiency ratio, core return on assets are non-GAAP financial
measures. For a reconciliation of these non-GAAP financial measures to their comparable GAAP measures, see slides 15 and 16 of this presentation. 4
As of and for the quarter ended
Mar 31, Dec 31, Mar 31,
Selected financial data 2018 2017 2017
Linked
Q Δ YoY Q Δ
Total loans $ 2,316,089 $ 2,259,831 $ 1,020,970 2.5 % 126.9%
Total deposits 2,493,794 2,342,912 1,221,696 6.4 104.1
Total assets 3,063,319 2,945,583 1,522,015 4.0 101.3
Total capital 497,433 488,929 242,725 1.7 104.9
Tangible common equity 317,376 307,312 213,699 3.3 48.5
Selected profitability 2018 2017 2017
Linked
Q Δ YoY Q Δ
Net interest income $ 29,102 $ 25,750 $ 11,253 13.0% 158.6%
Noninterest income 2,781 2,298 1,535 21.0 81.2
Noninterest expense 17,306 15,035 7,450 15.1 132.3
Core noninterest expense(1) 15,728 14,017 7,361 13.8 116.7
Net income available to common 10,388 3,257 3,098 218.9 235.3
Core net income available to common(1) 8,968 5,447 3,120 61.3 181.7
Selected ratios 2018 2017 2017
Linked
Q Δ YoY Q Δ
Net interest margin 4.46 % 4.24 % 3.21 % 5.2 % 38.9 %
Core net interest margin(1) 3.84 3.75 3.19 2.4 20.4
Reported diluted EPS $ 0.42 $ 0.14 $ 0.20 $ 0.28 $ 0.22
Core diluted EPS(1) 0.37 0.23 0.20 0.14 0.17
Reported efficiency ratio 54.28 % 53.60 % 58.26 % 1.3 % -6.8 %
Core reported efficiency ratio(1) 57.22 55.86 57.81 2.4 -1.0
Reported return on assets 1.41 0.48 0.83 193.8 69.9
Core return on assets(1) 1.22 0.80 0.83 52.5 47.0
Successful Growth of a Diversified Loan Portfolio
Total Loans(1)
$298
$398
$495
$603
$821
$992
$2,260 $2,316
Ending Balances
$ in millions
• First quarter loanyield is 5.75%
• Loan yield includes 72 basis points of purchase
discount accretion relating to acquired loans
• Excluding the impact of accretion, core loan
yield is 5.03% for 1Q18 vs 4.93% for 4Q17
5
Commercial
Real Estate
55%
Commercial
& Industrial
27%
Energy
2%
1-4 Family &
Consumer
16%
As of March 31, 2018
• For the period ended March 31, 2018, total loan balances increased $56.3 million, 2.5% or 10.0% annualized compared
to December 31, 2017.
• Excluding $26.3 million of loans that were sold in connection with the sale of two non-core branch locations, total loans
increased $82.6 million, 3.7% or 14.8% annualized compared to December 31,2017.
(1) Total loans does not includes loans held for sale and deferred fees.
Payoffs, Pay-downs and New Commitments
6
$885 $928 $927 $992 $1,021
$1,122
$1,908
$2,260 $2,316$143 $125 $131
$164 $158
$225
$163
$276
$358
1Q2016 2Q2016 3Q2016 4Q2016 1Q2017 2Q2017 3Q2017 4Q2017 1Q2018
Quarter-end Loan Balances
versus New Commitments
QTR End Balances New Commitments
Dollars in millions
$56 $67
$107 $82 $106 $73
$104
$172
$260
6% 7%
12%
8% 10% 6% 5% 8%
11%
1Q2016 2Q2016 3Q2016 4Q2016 1Q2017 2Q2017 3Q2017 4Q2017 1Q2018
Payoffs and Pay Downs
versus Loan Balances
Total Payoffs / Pay-downs Pay downs/offs % of ending balances
Superior Credit Quality
7
0.33%
0.23%
0.07% 0.08%
0.18%
0.02%
0.16%
2012 2013 2014 2015 2016 2017 1Q2018
0.21%
0.02%
0.08%
0.01%
0.03%
0.06%
0.00%
2012 2013 2014 2015 2016 2017 2018
Nonperforming Loans to Total Loans
Net Charge-offs to Average Loans
Deposit Mix
Total Funding Sources
.
$365
$448
$574 $639
$868
$1,120
$2,343
$2,494
Ending Balances
$ in millions
First quarter average rates:
• Interest-bearing deposits of 1.00%
• Total cost of funds of 0.82%
Total Deposits
8
Noninterest-bearing
24%
Money Market
31%
Correspondent
Money Market
15%
Wholesale/Borrowed
7%
Now/Savings
8%
Time
15%
As of March 31, 2018
• For the period ended March 31, 2018, deposit balances increased $150.9 million, 6.4% or 25.6% annualized over
balances at period ended December 31, 2017.
• Excluding $64.3 million of deposits that were sold in connection with the sale of two non-core branch locations, total
deposits increased $215.2 million, 9.4% or 37.6% annualized compared to December 31,2017.
Core Net Interest Income and Margin Growth
76%
14%
10%
82%
9%
9%
Interest-bearing deposits
in other banks
Investment Securities Loans
Quarterly Average Earning Asset Mix
Average 2Q2017 3Q2017 4Q2017 1Q2018
Loans 4.73% 4.85% 4.93% 5.03%
Deposits 0.78% 0.86 0.93 1.00%
(1)
9
86%
6%
8%
84%
6%
10%
$10,397 $10,459 $11,198 $12,241
$18,492
$22,795 $25,092
3.65%
3.42%
3.19%
3.49%
3.66%
3.75%
3.84%
3Q16 4Q16 1Q2017 2Q2017 3Q2017 4Q2017 1Q17
Quarterly Net Interest Trend
Core net interest income Core net interest margin
(1)
(1)Excludes 5 bps, 15 bps, 58 bps, and 72 of income recognized on acquired loans for 2Q2017, 3Q2017, 4Q2017, and 1Q2018, respectively. See Reconciliation of Non-GAAP Financial Measures for a reconciliation of
core net interest income and core net interest margin.
Impact of Acquisitions on Q1 2018
10
The effects of purchase accounting including accretion income on acquired loans, non-recurring merger
and acquisition costs, and the impact of fair value measurement continued to impact results in the first
quarter 2018. These items are isolated below:
For the three months ended March 31, 2018
A B C D E A-B-C-D-E
Dollars in thousands
Total
Income/Expense
(as reported)
Purchase
accounting
accretion
income on
acquired loans
Sale of Austin
and exit of
redundant
branches
M&A and
other related
one-time
expenses
1Tax Act Re-
measurement
impact from
fair value
adjustments
Income/Expense
less adjustments
Net interest income $ 29,102 $4,009 $ - $ - $ 25,093
Noninterest income 2,781 - 388 - 2,393
Noninterest expense 17,306 1,243 335 15,728
Income tax expense 3,511 (823) 175 69 (820) 2,112
1 The effective tax rate, excluding discrete items including Tax Act re-measurement from fair value adjustments, is 20.5%
Continue to leverage our strong capital through accretive organic
growth and strategic M&A opportunities
Focus on EPS, ROAA, and efficiency
CAPITAL STEWARDSHIP
11
Upgrade IT operational support resources, particularly network and
security to stay ahead of growth
Investment in technologies that will provide operational efficiencies
Dedication to maintaining excellence in compliance, BSA, and CRA
OPERATIONAL
EXCELLENCE
Continued emphasis on credit quality and relationship banking
Strategically grow lines of business: Community Banking, C&I, CRE,
Government Lending, and Correspondent Banking
STRATEGIC GROWTH
Continued commitment to provide employees with “best place to
work” experience
Commitment to employee stock ownership
CULTURE
Look Forward
12
Reconciliation of Non-GAAP Financial Measures
The Company’s management uses certain non-GAAP (generally accepted accounting principles) financial measures to evaluate its performance. The
Company has included in this presentation information related to these non-GAAP financial measures for the applicable periods presented.
Reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures are presented in the table below.
(Dollars in Thousands, Except Per Share)
.
As of or For the Quarter Ended
March 31, 2018 December 31, 2017 September 30, 2017 June 30, 2017 March 31, 2017
Net interest income (as reported) $ 29,102 $ 25,750 $ 19,129 $ 12,376 $ 11,253
Adjustment: Income recognized on acquired loans (4,009) (2,955) (637) (135) (55)
Core net interest income 25,093 22,795 18,492 12,241 11,198
Provision for loan losses (as reported) 678 2,529 752 943 890
Noninterest income (as reported) 2,781 2,298 1,977 1,766 1,535
Adjustment: Gain on sale of branch locations (388) - - - -
Core noninterest income 2,393 2,298 1,977 1,766 1,535
Noninterest expense (as reported) 17,306 15,035 12,522 7,782 7,450
Adjustment: Sublease one-time consent fee, net (1,071) - - - -
Branch closure expenses (172) - - - -
M&A and other related on-time expenses (335) (1,018) (1,391) (193) (89)
Core noninterest expense 15,728 14,017 11,131 7,589 7,361
Core net income from operations 11,080 8,547 8,586 5,475 4,482
Income tax expense (as reported) 3,511 7,227 2,650 1,802 1,350
Adjustment: Tax impact of adjustments (579) (678) 264 20 12
Deferred tax asset re-measurement due to Tax Act (820) (3,051) - - -
Other M&A discrete tax items - (398) - - -
Core income tax expense 2,112 3,100 2,914 1,822 1,362
Net income (as reported) 10,388 3,257 5,182 3,615 3,098
Core net income 8,968 5,447 5,672 3,653 3,120
Core net income available to common stockholders $ 8,968 $ 5,447 $ 5,630 $ 3,653 $ 3,120
Weighted average diluted shares outstanding 24,539 23,524 20,392 15,637 15,632
Earnings Per Share
Diluted earnings per share (as reported) $ 0.42 $ 0.14 $ 0.25 $ 0.23 $ 0.20
Core diluted earnings per share 0.37 0.23 0.28 0.23 0.20
Efficiency Ratio
Efficiency Ratio (as reported) 54.28% 53.60% 61.52% 58.96% 62.62%
Core Efficiency Ratio 57.22% 55.86% 56.45% 58.09% 62.15%
Net Interest Margin
Net interest margin (as reported) 4.46% 4.24% 3.78% 3.53% 3.21%
Core net interest margin 3.84% 3.75% 3.66% 3.49% 3.19%
Net Interest Margin
Return on average assets (as reported) 1.41% 0.48% 0.94% 0.97% 0.83%
Core return on average assets 1.22% 0.80% 1.02% 0.98% 0.83%
13
Reconciliation of Non-GAAP Financial Measures
The Company’s management uses certain non-GAAP (generally accepted accounting principles) financial measures to evaluate its performance
including tangible book value per common share and tangible common equity to tangible assets. The Company has included in this presentation
information related to these non-GAAP financial measures for the applicable periods presented. Reconciliation of these non-GAAP financial measures
to the most directly comparable GAAP financial measures are presented in the table below.
(Dollars in Thousands, Except Per Share)
For the Three Months Ended
March 31, December 31, September 30, June 30, March 31,
2018 2017 2017 2017 2017
Tangible Common Equity
Total stockholders’ equity $ 497,433 $ 488,929 $ 445,929 $ 247,602 $ 242,725
Adjustments:
Goodwill (161,685) (159,452) (135,832) (26,865) (26,865)
Intangible assets (18,372) (22,165) (10,531) (2,171) (2,161)
Total tangible common equity $ 317,376 $ 307,312 $ 299,566 $ 218,566 $ 213,699
Tangible Assets
Total assets $ 3,063,319 $ 2,945,583 $ 2,494,861 $ 1,508,589 $ 1,522,015
Adjustments:
Goodwill (161,685) (159,452) (135,832) (26,865) (26,865)
Intangible assets (18,372) (22,165) (10,531) (2,171) (2,161)
Total tangible assets $ 2,883,262 $ 2,763,966 $ 2,348,498 $ 1,479,553 $ 1,492,989
Tangible Common Equity to Tangible Assets 11.01% 11.12% 12.76% 14.77% 14.31%
Common shares outstanding 24,149 24,110 22,644 15,233 15,229
Book value per common share $ 20.60 $ 20.28 $ 19.69 $ 16.25 $ 15.94
Tangible book value per common share 13.14 12.75 13.23 14.35 14.03
14